The Extractive Industry Sector in Nigeria is the primary source of revenue for government. The oil sector accounts for about 95% of export revenues, 76% of government revenues and about a third of the nation's Gross Domestic Product. Similarly, Nigeria has an estimated 180 billion cubic feet of proven natural gas reserves making it the 9th largest concentration in the world.
Although this has not translated to wealth and acceptable welfare for the citizens, revenues from sector remain a dominant issue in national discourse. There are several revenue streams from the sector that accrue to the Nigerian people. These include royalties, signature bonuses, investment dividends, and profit sharing. The most prominent of these streams are Taxes. Various forms of taxes are paid by firms engaged in exploration and mining of naturalresources. These include the Petroleum Profit tax, Company Income Tax, Education Tax, etc.
The issues of contract transparency, confidentiality clauses, discretionary awards, complicated fiscal regimes, self assessment by companies; tax incentives and capacity of personnel of tax authorities continue to reverberate the issues.
With increasing interest in diversifying the economy and venturing into solid minerals exploration and with the general review of tax policies and the prominence of events and activities in the sector as demonstrated in the excitement surrounding the Petroleum Industry Bill, it has become necessary to further examine how to improve extractive tax revenues while ensuring competitiveness and equity for investors. This can be achieved through more robust fiscal regimes and efficient administration.
This Brief is intended by the Civil Society Legislative Advocacy Centre as part of its Tax Justice Advocacy intervention under the Capacity for Research and Advocacy for Fair Tax (CRAFT) project to contribute to the policy evolution.
We thank Dr. Jumoke Oduwole and Dr. Abiola Sanni for developing this Brief.
We hope relevant stakeholders and institutions will find its recommendation useful in developing adequate legal, institutional and regulatory frameworks that will generate maximum tax from the extractive sector for use for the development and provision of qualitative service to the general population.
Download the full Brief here.